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Most informed economic commentary I've read fully expected a brief spike in inflation, but does not expect any kind of runaway inflation over the medium and lon

Most informed economic commentary I've read fully expected a brief spike in inflation, but does not expect any kind of runaway inflation over the medium and long-term. I'm just not worried, especially with the twin biases of news reporting: sensationalism and favorable coverage of the views of big finance.

omginternets 5y ago
>favorable coverage of the views of big finance I'm horrifically ignorant of economics. Why is the "runaway inflation" story favorable to big finance?
- igorkraw 5y ago
  Invest into stocks to save yourself from inflation maybe?
  - RosanaAnaDana 5y ago
    Buy real property if you can.
    - the_fire_friar 5y ago
      Not sure why this is down voted. Real estate is a common hedge against inflation. It's just much more complex of an investment vehicle and you can't just jump in and out of real estate like you can stocks. You could opt for a REIT instead. https://www.investopedia.com/terms/r/reit.asp https://www.investopedia.com/terms/r/reit.asp
      - staticman2 5y ago
        While I don't know why it was downvoted "Buy real property if you can" is pretty crummy advice, unless you think an investor doesn't have to do any due diligence and should "just buy" stuff. How do you know what property to buy? How much property should you own as a percent of your net worth? What is the expected return of the property? What is the likelyhood you will lose money on the property versus the likelyhood you will make money? Those are all important questions not addressed by "Buy real property if you can" As for Reits, there's not a lot of financial advisors advocating high investments in Reits. For example the Vanguard Target Retirement fund of funds have very little. The Schwab Intelligent Portfolio seem to call for 5% REITS in an example I pulled up online. Maybe you know something Vanguard and Schwab does not, but again, there's that question of due diligence.
    - jonnycomputer 5y ago
      in the long term real estate is the winner.
  - heyparkerj 5y ago
    From what I've been reading (disclaimer - over the past few hours) the types of stocks you target during periods of inflation changes. You're also playing a bit of a guessing game, because your return will be less than other investments if an inflationary period does not actually realize.
    - nightski 5y ago
      This is what makes broad index funds so attractive. VTI, VXUS, etc...
- milkytron 5y ago
  I think what the original commenter meant was that news outlets generally echo what big finance says. Meaning that they favor the views of big finance (as opposed to favoring coverage of the views of others).
  - jonnycomputer 5y ago
    Yes. And they generally appear to worry over inflation more. Perhaps because inflation tends to favor debtors rather than creditors.
- patrickk 5y ago
  My guess is that those who run large financial institutions came of age when inflation was much higher and a difficult beast to tame. Therefore they see the inflation boogeyman around every corner even though it hasn’t been like that in a long time. (That’s not to say high inflation won’t come at some point, but so far the doom and gloom merchants have been wrong for decades). You see this inflation mania most clearly with the ECB, which essentially is controlled by Germans. They fear a Weimar Republic-style hyperinflation above all else. So some of the policies coming out of the 2008 crisis reflected this, instead of being flexible enough to cope with the actual conditions and challenges of the day.
  - NoOneNew 5y ago
    Yea, but let's metaphor the boogey man issue to driving a car. When you drive, you're often avoiding collisions. Mostly passively. If you drive faster than the car in front of you, you will crash. If you dont brake at a red light, you will crash. Most people dont crash most of the time because they respect the threat. You cant just go, "you know, I haven't crashed in 5 years. I dont have to brake at this red light." Sure, inflation issues aren't that prevalent in the past few decades. Doesn't mean you stop assuming it's not a possibility. You do things to avoid it. The longer you do that, the longer you avoid problems. You cant stop your precautions just because it's been a while, then whine why the problem reemerged.
    - patrickk 5y ago
      I never said it’s no longer a possibility. Just that for every news event that happens, there is an immediate chorus of “inflation!!!!” no matter the circumstances. Some economists argue that there is indeed considerable inflation right now- except it’s in financial assets owned mostly by the wealthy, like the stock market trading at high P/Es, housing (inflated in multiple countries, not just the US due to easy credit). There was also a headline recently that VC investing is record high at the moment. So there’s inflation, just not in consumer staples.
  - nostromo 5y ago
    The reason it is so feared is because it's next to impossible to contain once it starts without causing massive economic hardship. In fact, the Fed could likely do next to nothing about inflation with our country's current debt levels. Even at a historically average rate of 8%, our federal government would either go bankrupt, cut most spending, or massively raise taxes, causing a severe economic retraction. (Our $26T in debt would require half of the entire federal budget to service our debt at such rates.) Many of our largest corporations would also fold, unable to service their massive debts. It'd be a disaster. That's why people fear runaway inflation, even if it hasn't been a problem for several decades. Once you can identify it as a problem, it's too late.
option 5y ago
more than 20% of all US dollars that ever existed were created in the last 2 years and there are “no worries”? I’d like to learn more why.
- 01100011 5y ago
  I have heard people claim that QE is disinflationary because the dollars are tied up and don't add velocity but I haven't grokked their reasons why.
  - pram 5y ago
    QE and the repo operations the Fed does are “providing liquidity” to activity that would (presumably) normally happen anyway. I’d assume this would be the reason. You can argue the activity wouldn’t happen if interest rates weren’t kept artificially low. Another thing is these security purchases are largely insulated from what is used to calculate inflation. These are exchanges between banks and funds and similar.
- ethbr0 5y ago
  Good question! Because inflation is the sum of money supply + velocity + consumer expectations + goods production + international monetary markets? Which explains why historical attempts to point to any one and say "Inflation is coming / not coming!" have fared poorly.
  - zpeti 5y ago
    Historical: Except in those cases most printed money went to banks, buying their bad loans. Which had already affected house prices by 2008, and only affected asset and commodity prices, which did rise in price since 2008. This time round you have more and more stimulus going to ordinary people, who will spend it on ordinary goods like food. That will create a different type of inflation. (I’m not endorsing either type of bailout/stimulus btw)
    - ethbr0 5y ago
dannyw 5y ago
Most informed economics are worse than a coinflip at predicting the future, so you might actually want to negate their opinions to get closer to the truth. Or at the very least, disregard a speciality who consistently gets things wrong
- uses 5y ago
  This is borderline trolling because you're not really saying anything specific. Mainstream modern economics doesn't "consistently get things wrong", you just might not notice or care when it consistently gets things right. Because it's boring and well, predictable.
  - NoOneNew 5y ago
    To back up the commenter's statement: most well informed economists kept pushing that China would sell US Treasury Bonds pennies on the dollar to "ruin" the US economy. Anyone with a half a brain and some real world business knowledge would realize: Do you really want to be the guy who mentions, let alone put into motion, that losing hundreds of billions of dollars worth of receipts to make a negotiation situation worse, is a good idea? At that, selling bonds at a discount helps open up for allied nations to suck up those bonds to make more future money themselves. Thus powering the US negotiation side even more. And did they play the bond game? Obviously not. They're not stupid. "I'm going to burn my money just to piss you guys off!" Seriously, many public figure economists are idiots. Not all. The good one's public discourse gets reserved to small press geopolitical publications. Even then, they always acknowledge how fickle an economy can be and how easy it is to be blindsided. So yea, high inflation in the next 5-10 years is a real possibility, especially as the stimulus bond payments start to mount.
    - lottin 5y ago
      > most well informed economists kept pushing that China would sell US Treasury Bonds pennies on the dollar Who's saying that?
      - 5y ago
eplanit 5y ago
You forgot a bias: consistently favorable reporting on the Biden administration.

omginternets 5y ago

>favorable coverage of the views of big finance I'm horrifically ignorant of economics. Why is the "runaway inflation" story favorable to big finance?

igorkraw 5y ago
Invest into stocks to save yourself from inflation maybe?
- RosanaAnaDana 5y ago
  Buy real property if you can.
  - the_fire_friar 5y ago
    Not sure why this is down voted. Real estate is a common hedge against inflation. It's just much more complex of an investment vehicle and you can't just jump in and out of real estate like you can stocks. You could opt for a REIT instead. https://www.investopedia.com/terms/r/reit.asp https://www.investopedia.com/terms/r/reit.asp
    - staticman2 5y ago
      While I don't know why it was downvoted "Buy real property if you can" is pretty crummy advice, unless you think an investor doesn't have to do any due diligence and should "just buy" stuff. How do you know what property to buy? How much property should you own as a percent of your net worth? What is the expected return of the property? What is the likelyhood you will lose money on the property versus the likelyhood you will make money? Those are all important questions not addressed by "Buy real property if you can" As for Reits, there's not a lot of financial advisors advocating high investments in Reits. For example the Vanguard Target Retirement fund of funds have very little. The Schwab Intelligent Portfolio seem to call for 5% REITS in an example I pulled up online. Maybe you know something Vanguard and Schwab does not, but again, there's that question of due diligence.
  - jonnycomputer 5y ago
    in the long term real estate is the winner.
- heyparkerj 5y ago
  From what I've been reading (disclaimer - over the past few hours) the types of stocks you target during periods of inflation changes. You're also playing a bit of a guessing game, because your return will be less than other investments if an inflationary period does not actually realize.
  - nightski 5y ago
    This is what makes broad index funds so attractive. VTI, VXUS, etc...
milkytron 5y ago
I think what the original commenter meant was that news outlets generally echo what big finance says. Meaning that they favor the views of big finance (as opposed to favoring coverage of the views of others).
- jonnycomputer 5y ago
  Yes. And they generally appear to worry over inflation more. Perhaps because inflation tends to favor debtors rather than creditors.
patrickk 5y ago
My guess is that those who run large financial institutions came of age when inflation was much higher and a difficult beast to tame. Therefore they see the inflation boogeyman around every corner even though it hasn’t been like that in a long time. (That’s not to say high inflation won’t come at some point, but so far the doom and gloom merchants have been wrong for decades). You see this inflation mania most clearly with the ECB, which essentially is controlled by Germans. They fear a Weimar Republic-style hyperinflation above all else. So some of the policies coming out of the 2008 crisis reflected this, instead of being flexible enough to cope with the actual conditions and challenges of the day.
- NoOneNew 5y ago
  Yea, but let's metaphor the boogey man issue to driving a car. When you drive, you're often avoiding collisions. Mostly passively. If you drive faster than the car in front of you, you will crash. If you dont brake at a red light, you will crash. Most people dont crash most of the time because they respect the threat. You cant just go, "you know, I haven't crashed in 5 years. I dont have to brake at this red light." Sure, inflation issues aren't that prevalent in the past few decades. Doesn't mean you stop assuming it's not a possibility. You do things to avoid it. The longer you do that, the longer you avoid problems. You cant stop your precautions just because it's been a while, then whine why the problem reemerged.
  - patrickk 5y ago
    I never said it’s no longer a possibility. Just that for every news event that happens, there is an immediate chorus of “inflation!!!!” no matter the circumstances. Some economists argue that there is indeed considerable inflation right now- except it’s in financial assets owned mostly by the wealthy, like the stock market trading at high P/Es, housing (inflated in multiple countries, not just the US due to easy credit). There was also a headline recently that VC investing is record high at the moment. So there’s inflation, just not in consumer staples.
- nostromo 5y ago
  The reason it is so feared is because it's next to impossible to contain once it starts without causing massive economic hardship. In fact, the Fed could likely do next to nothing about inflation with our country's current debt levels. Even at a historically average rate of 8%, our federal government would either go bankrupt, cut most spending, or massively raise taxes, causing a severe economic retraction. (Our $26T in debt would require half of the entire federal budget to service our debt at such rates.) Many of our largest corporations would also fold, unable to service their massive debts. It'd be a disaster. That's why people fear runaway inflation, even if it hasn't been a problem for several decades. Once you can identify it as a problem, it's too late.

option 5y ago

more than 20% of all US dollars that ever existed were created in the last 2 years and there are “no worries”? I’d like to learn more why.

01100011 5y ago
I have heard people claim that QE is disinflationary because the dollars are tied up and don't add velocity but I haven't grokked their reasons why.
- pram 5y ago
  QE and the repo operations the Fed does are “providing liquidity” to activity that would (presumably) normally happen anyway. I’d assume this would be the reason. You can argue the activity wouldn’t happen if interest rates weren’t kept artificially low. Another thing is these security purchases are largely insulated from what is used to calculate inflation. These are exchanges between banks and funds and similar.
ethbr0 5y ago
Good question! Because inflation is the sum of money supply + velocity + consumer expectations + goods production + international monetary markets? Which explains why historical attempts to point to any one and say "Inflation is coming / not coming!" have fared poorly.
- zpeti 5y ago
  Historical: Except in those cases most printed money went to banks, buying their bad loans. Which had already affected house prices by 2008, and only affected asset and commodity prices, which did rise in price since 2008. This time round you have more and more stimulus going to ordinary people, who will spend it on ordinary goods like food. That will create a different type of inflation. (I’m not endorsing either type of bailout/stimulus btw)
  - ethbr0 5y ago

dannyw 5y ago

Most informed economics are worse than a coinflip at predicting the future, so you might actually want to negate their opinions to get closer to the truth. Or at the very least, disregard a speciality who consistently gets things wrong

uses 5y ago
This is borderline trolling because you're not really saying anything specific. Mainstream modern economics doesn't "consistently get things wrong", you just might not notice or care when it consistently gets things right. Because it's boring and well, predictable.
- NoOneNew 5y ago
  To back up the commenter's statement: most well informed economists kept pushing that China would sell US Treasury Bonds pennies on the dollar to "ruin" the US economy. Anyone with a half a brain and some real world business knowledge would realize: Do you really want to be the guy who mentions, let alone put into motion, that losing hundreds of billions of dollars worth of receipts to make a negotiation situation worse, is a good idea? At that, selling bonds at a discount helps open up for allied nations to suck up those bonds to make more future money themselves. Thus powering the US negotiation side even more. And did they play the bond game? Obviously not. They're not stupid. "I'm going to burn my money just to piss you guys off!" Seriously, many public figure economists are idiots. Not all. The good one's public discourse gets reserved to small press geopolitical publications. Even then, they always acknowledge how fickle an economy can be and how easy it is to be blindsided. So yea, high inflation in the next 5-10 years is a real possibility, especially as the stimulus bond payments start to mount.
  - lottin 5y ago
    > most well informed economists kept pushing that China would sell US Treasury Bonds pennies on the dollar Who's saying that?
    - 5y ago

eplanit 5y ago

You forgot a bias: consistently favorable reporting on the Biden administration.